ADC Limited Produces Paints

Multiple Choice

ADC Limited produces paints. In March, the Rose Red production process used 12,000 litres of material at a cost of £120,000 and incurred conversion costs of £75,000. Normal losses are 10% of input materials. All losses from the process can be sold for £0.50 per litre. During March, 10,600 litres of Rose Red paint were produced. What is the balance on the abnormal loss account that will be reported to management in the costing statement of profit or loss for March?

A) £3,000
B) £3,500
C) £3,600
D) £3,700